Denmark has become an attractive hub for foreign entrepreneurs due to its business-friendly environment, stable economy, and transparent regulatory system. Setting up a company in Denmark offers strategic access to the European market, alongside numerous benefits, such as a low corporate tax rate and efficient online registration processes. Damalion will walk you through the key steps involved in registering a company in Denmark , covering the types of legal entities, share capital requirements, and the taxation framework.
1. Choosing the appropriate legal structure
The first and most crucial step in establishing your business in Denmark is choosing the right legal entity. Each form has its unique characteristics, liability structures, and share capital requirements.
A. Private Limited Company (ApS – Anpartsselskab)
- Share Capital: Minimum DKK 40,000 (€5,400), which can be contributed in cash or assets.
- Liability: Limited to the company’s capital, shielding personal assets from business liabilities.
- Best Suited For: Small to medium-sized businesses that require flexibility but also limited liability for shareholders.
B. Public Limited Company (A/S – Aktieselskab)
- Share Capital: Minimum DKK 400,000 (€54,000), with at least 25% to be paid up at registration.
- Liability: Shareholders’ liability is limited to their shareholdings.
- Best Suited For: Large enterprises or companies planning to go public or attract significant investment.
C. Sole Proprietorship (Enkeltmandsvirksomhed)
- Share Capital: No minimum capital required.
- Liability: The owner has full personal liability for all business debts and obligations.
- Best Suited For: Entrepreneurs looking to start small businesses or self-employment ventures.
D. General Partnership (I/S – Interessentskab)
- Share Capital: No capital requirements, but partners typically contribute according to an agreement.
- Liability: Partners have joint and several liabilities for the debts and obligations of the partnership.
- Best Suited For: Two or more individuals seeking to share control and profits equally.
2. Registering Your company with the Danish business authority
Once you have selected the legal form, the next step is to officially register your company with the Danish Business Authority (Erhvervsstyrelsen). You can complete this process online through the Virk platform, which is user-friendly and available in both Danish and English.
A. Registration Process
- Company Name Selection: Choose a unique name that complies with Danish naming regulations.
- Obtain NemID: Both the owner and any shareholders need a NemID, a secure digital signature used for business transactions in Denmark.
- Shareholders Agreement: Draft a shareholders’ agreement if you have multiple shareholders.
- Articles of Association: Prepare and submit your company’s articles of association, detailing the rules for running the company.
- Pay Share Capital: Deposit the required share capital in a Danish bank account. This must be documented and submitted during registration.
- Obtain CVR Number: Upon successful registration, the Danish Business Authority issues your business a CVR number, which serves as your company’s identification in Denmark.
B. Timeline for Registration
The entire registration process typically takes 1-2 business days, provided that all documents and requirements are met.
3. Understanding the Danish tax regime
Denmark’s tax regime is competitive and straightforward for companies. However, it’s essential to be familiar with the various taxes that apply to businesses, including corporate tax, VAT, and taxes on dividends and capital gains.
A. Corporate Income Tax
- The corporate tax rate in Denmark is 22% as of 2024. This applies to all profits generated by the company, regardless of the size or type of business. The corporate tax must be paid annually, with the deadline typically falling six months after the end of the fiscal year.
- Companies can also apply joint taxation if they are part of a group of companies where one company owns more than 50% of the others. This allows profits and losses to be pooled across the group, potentially reducing the overall tax burden.
B. Value-Added Tax (VAT)
- The standard VAT rate in Denmark is 25%, one of the highest in Europe. Businesses must register for VAT once their taxable turnover exceeds DKK 50,000.
- VAT returns must be filed quarterly, and businesses are responsible for collecting VAT on goods and services sold in Denmark.
4. Dividend and Capital Gains Taxation
A. Dividends Taxation
Denmark imposes a dividend tax of 27% on dividends paid to shareholders, which applies to both Danish residents and non-residents.
However, shareholders who receive dividends over DKK 58,900 are subject to a higher rate of 42% on the excess amount
Dividends are declared at the annual general meeting, and it is crucial to report dividend distributions to the Danish Tax Agency (SKAT).
B. Capital Gains Taxation
Profits from the sale of shares or other capital assets are also subject to capital gains tax. The capital gains tax rate is 27% on gains up to DKK 58,900, with any amount exceeding that taxed at 42%.
However, exemptions or lower rates may apply if Denmark has a tax treaty with the foreign investor’s country.
5. Reporting and compliance requirements
A. Annual Report Submission
All Danish companies are required to file an annual report with the Danish Business Authority. The report must include financial statements, a management review, and details of any significant business activities.
B. Audit Requirements
Private limited companies (ApS) and public limited companies (A/S) are required to appoint an auditor and submit audited financial statements if they meet two of the following three criteria:
- A turnover exceeding DKK 8 million.
- Total assets exceeding DKK 4 million.
- An average of 12 employees.
6. Advantages of setting up a company in Denmark
Denmark’s business environment offers several advantages to foreign entrepreneurs:
- Access to the EU Market: Companies registered in Denmark can operate freely across the European Union.
- Efficient Digital Infrastructure: Denmark is known for its advanced digital infrastructure, which makes it easier for businesses to operate and communicate globally.
- Skilled Workforce: Denmark boasts a highly educated workforce with proficiency in English, making it easier for foreign companies to recruit local talent.
- Ease of Doing Business: Denmark consistently ranks among the top countries globally for ease of doing business, particularly due to its streamlined regulatory procedures.
Starting a business in Denmark offers many opportunities for entrepreneurs seeking to enter the European market. From choosing the right legal structure to understanding the taxation system, there are several important factors to consider. By following the outlined steps and maintaining compliance with Danish regulations, foreign entrepreneurs can establish and grow successful businesses in this dynamic and supportive environment.
Damalion helps international entrepreneurs to register their company in Denmark with business bank accounts. Contact your Damalion expert now.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
